How this calculator works
The payment is only part of it. Yearly costs are spread across twelve months so the car shows up in the budget at its real monthly size. The share of gross income is shown for comparison with the 20/4/10 guideline many people use, which keeps total car costs around 10%.
- Monthly cost = payment + insurance + fuel + parking and tolls + (maintenance per year + registration and fees per year) ÷ 12.
- Per mile = monthly cost × 12 ÷ miles driven per year.
- Share of gross income = monthly cost ÷ gross monthly income × 100.
Worked example
With these inputs: loan or lease payment $420; insurance per month $160; fuel or charging per month $150; maintenance and tyres per year $900; registration, taxes, inspection per year $250; parking and tolls per month $0; miles driven per year 12000; gross monthly income $5,500.
The result is real cost per month $825.83, with per year $9,910.00 and on top of the payment $405.83 a month.
The costs people leave out
Maintenance and tyres don't arrive every month, so they don't feel like a car bill — until an oil change, a set of tyres and a brake job land in the same quarter. Spreading the yearly figure over twelve months turns it into a small monthly amount you can set aside; the calculator suggests it as a "car upkeep fund" bill.
Registration, inspection and personal property tax work the same way. So does depreciation, which this calculator doesn't include because you don't pay it monthly — but it's why a newer car costs more to own than its payment suggests.
How much of your income should a car take?
A popular guideline is 20/4/10: at least 20% down, a loan of no more than four years, and total car costs around 10% of gross income. It's a rule of thumb, not a requirement, but a share well above it usually means the car is squeezing savings or debt payoff. The How Much Car Can I Afford calculator works backwards from the guideline to a price.
Transportation is one of the biggest household expenses in the Bureau of Labor Statistics' Consumer Expenditure Surveys, second only to housing for many households, so it's often where a budget has the most room to change.
Sources
Frequently asked questions
How much does it cost to own a car per month?
Add every cost, not just the payment. In the example — $420 payment, $160 insurance, $150 fuel, $900 a year maintenance and $250 a year in fees — the real cost is $825.83 a month, $405.83 more than the payment, and $9,910 a year.
How do I work out the cost per mile?
Divide the yearly cost by miles driven. At $9,910 a year and 12,000 miles, it's about $0.83 a mile — useful when comparing a car with transit, ride-share or a cheaper car.
What is the 20/4/10 rule for cars?
A guideline: put at least 20% down, finance for no more than four years, and keep total car costs around 10% of gross income. The calculator shows your share so you can compare.
How much should I budget for car maintenance?
Look at the last year or two of receipts and include tyres. Enter the yearly figure; the calculator spreads it over twelve months so the money is there when the bill comes.
Is an electric car cheaper to own?
Often on fuel and maintenance, sometimes not on insurance or the payment. Enter charging instead of fuel and compare the two cars side by side with the same calculator. FuelEconomy.gov lists energy costs for most models.